Introduction
By the end of the eighties the old Swedish telephone company Ericsson stood strong. They had a diversified revenue income stream, operating in defence, radar and second in the world in landline telecom, after the American giant AT&T. Also, a little research project that had started in a lab outside Gothenburg had started to take off. This was wireless telecom and had been identified to have a huge market potential by top management. This new business demanded heavy investments in cutting edge technology but revenue came in from all parts of the firm and Ericsson had the investor’s confidence, backed by the two strongest business spheres in Sweden. At the same time there was a similar company in the neighbour country of Finland. Nokia, an old engineering company, offered similar products but had lived in the shadow of Ericsson. Wireless telecom took of and together with internet soon became the growth industry of the nighties. Every trader on Wall Street all by a sudden knew about these two companies from the remote north of Europe. In a rapidly growing market there was money to be made for all players in this field but when the stock market rally of the nineties was over, its little brother from Finland outperformed Ericsson. This paper will look at the strategic paths these companies took and why the smaller player managed to outperform the giant.
Focal firm
Lars Eric Ericsson founded Ericsson 1876. Ericsson has always been a technological driven company, usually with engineers as top management. Ericsson is a diversified company operating in defence, radar, telephone and wireless telephone. Although a diversified engineering company, Ericsson’s tremendous growth during the nineties comes from their expertise wireless telephoning. This includes mobile systems, components and mobile phones. The distinctive competence comes from their expertise in mobile systems. They were first with NMT (G1) and later with the GMS (G2) system currently in use. Ericsson is a company full of engineers and the engineering culture is deeply rooted within the company. It has always been in the forefront in mobile systems and R&D is a cornerstone in this company. However, it is not enough to be good at engineering.
Table of Contents
1. Introduction
2. Focal firm
3. Competitor
4. Competitive environment
5. Strategic issues
5.1. Superior capacity
5.2. Psychological dominance
5.3. Dynamic control
6. Conclusion
Objectives and Topics
This paper examines the diverging strategic trajectories of the Swedish telecommunications giant Ericsson and its Finnish competitor Nokia during the 1990s. The primary research goal is to identify why the smaller player, Nokia, was able to successfully outperform the established industry leader, Ericsson, by adapting to the shifting demands of the mobile telecommunications market.
- Comparison of corporate structures and strategic orientations
- Transformation from business-to-business (B2B) to consumer-focused markets
- Analysis of market responsiveness and product design strategies
- Strategic assessment of joint ventures versus independent growth
- Evaluation of market share dynamics in mobile systems and mobile phones
Excerpt from the Book
6.1. Superior capacity
Comparing the two companies in aspect of knowledge, organization, human resources, physical assets, financial position and political situation, the two companies looked quite similar on paper. Ericsson was somewhat larger and seen as the big brother of Nokia.
However, Master Tzu writes, “know your enemy and yourself”. It seems like Nokia took aim at this point when it comes to the mobile telephones and changed the perceptual aspect towards the consumer.
Nokia and Ericsson were engineering companies with most of their business being business to business (B2B). Their technical competence did not differ much in this field. But whereas Ericsson did “ugly” phones with menu system hard to understand, Nokia came out with phones not always with new technology but different packaging. They were first to put games in their phones and the consumer could chose not only between different colours but also different motives. Art by different artists such as Keith Harring was used and phones were aggressively pushed in media. Also, Nokia’s phones were perceived as user friendly. Nokia as managed to expand their core competence from cutting edge technology and B2B to include Business to consumers and hence, get a competitive advantage with increased market share as a result whereas Ericsson has grown through a growing market but not really increased their relative position.
Summary of Chapters
1. Introduction: Provides an overview of the telecommunications landscape in the late eighties and sets the context for the competition between Ericsson and Nokia.
2. Focal firm: Details the historical background, technological expertise, and corporate culture of Ericsson as an established engineering-driven leader.
3. Competitor: Outlines Nokia's transition from traditional industries to telecommunications and their strategic pivot toward consumer-oriented product design.
4. Competitive environment: Examines the broader market conditions, including capital intensity, the impact of the economic slowdown, and the transition to G3 technology.
5. Strategic issues: Analyzes the core differences in competitive capability, psychological influence, and market control that determined the success of the two companies.
6. Conclusion: Synthesizes the findings and identifies the key factors that allowed Nokia to become the stronger rival in the global market.
Keywords
Ericsson, Nokia, Mobile Telecommunications, Strategic Assessment, Competitive Analysis, Market Share, B2B, B2C, Innovation, Corporate Strategy, Telephony, Global Market, Industry Consolidation, Consumer Goods, G3 Technology
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on comparing the strategic development and market performance of Ericsson and Nokia during the 1990s, specifically exploring how Nokia successfully surpassed Ericsson as a global market leader.
What are the central themes discussed in this analysis?
The core themes include the transition of mobile phones from niche tools to consumer products, the impact of corporate culture on strategic adaptability, and the influence of market positioning on financial sustainability.
What is the primary research question?
The study aims to determine the specific strategic paths taken by Ericsson and Nokia and explain the underlying reasons why the smaller company, Nokia, was able to outperform the industry giant.
Which methodology is employed in this work?
The paper utilizes a comparative business strategy analysis, evaluating both companies across multiple vectors including organizational structure, human resources, financial health, and market responsiveness.
What topics are covered in the main section?
The main sections evaluate the "focal firm" (Ericsson), the "competitor" (Nokia), the "competitive environment" of the global telecom industry, and specific "strategic issues" such as psychological dominance and dynamic control.
Which keywords best characterize the work?
Key terms include competitive strategy, market share dynamics, B2B vs. B2C focus, consumer electronic goods, and industrial consolidation in telecommunications.
How did Nokia's approach to product design differ from Ericsson's?
Nokia recognized mobile phones as consumer electronic goods, emphasizing user-friendliness, aesthetic customization, and aggressive marketing, whereas Ericsson maintained a rigid focus on the technical engineering aspects of the devices.
What role did the Sony joint venture play in Ericsson's strategy?
The joint venture with Sony was a reactive measure taken by Ericsson to address its lack of consumer market expertise and to mitigate the significant financial losses incurred in its mobile phone segment.
- Citation du texte
- MBA Hakime Isik-Vanelli (Auteur), 2004, Strategic assessment - Ericsson , Munich, GRIN Verlag, https://www.grin.com/document/26485
